Freelancer Taxes: Schedule C, Estimates & SE Tax

Freelance income is business income in the eyes of the IRS, which means you’re running a sole proprietorship by default and must file like one — even if you never formed an LLC. In practice, that usually means reporting your revenue and deductible expenses on Schedule C and calculating self-employment (SE) tax — Social Security and Medicare — on your net profit using Schedule SE. SE tax is in addition to regular income tax, and the IRS is explicit that gig/side-work earnings are taxable even if you don’t receive a 1099 or you were paid in cash or via a wallet app. If you expect to owe tax and you don’t have withholding, you’re expected to make quarterly estimated payments with Form 1040-ES or via your IRS online account to avoid penalties. Platforms may issue Form 1099-NEC for services (generally at $600+) or Form 1099-K when goods/services payments exceed the current reporting threshold, but those forms are informational; you must report all taxable income regardless. Keeping a separate bank account and simple books (income, expenses, mileage/vehicle, inventory if any) makes compliance straightforward and preserves deductions you’ve earned. Finally, 2025 has a few practical updates worth noting: new standard mileage rates, continued $5,000 1099-K threshold, and updated retirement/health deduction mechanics (Form 7206) that can reduce your taxable income if you plan ahead. This guide walks you through the money flow in plain English so you can file accurately, pay on time, and keep more of what you earn.

How Freelance Income Is Reported: Schedule C, Schedule SE, and What Counts as “Business”

For tax purposes, most freelancers are sole proprietors, and the IRS expects you to file Schedule C (Form 1040) to report your business income and expenses. An activity is a business if your primary purpose is income or profit and you engage with continuity and regularity — this separates a true business from a hobby. Schedule C totals your gross receipts and reduces them by ordinary and necessary expenses to arrive at net profit (or loss). That net number then flows to your Form 1040 and is also the basis for Schedule SE, which computes the self-employment tax you owe for Social Security and Medicare. The SE tax rate is 15.3%, split 12.4% Social Security (up to the annual wage base) and 2.9% Medicare; Schedule SE also handles the half-SE-tax adjustment you can deduct on your 1040. A frequent beginner mistake is assuming tax only applies when a 1099 arrives; the IRS’s Gig Economy Tax Center is explicit that gig income is taxable even if a platform or payer doesn’t send a form. If you sell goods or take payments via an app/marketplace, you may receive a Form 1099-K, but the reporting threshold doesn’t change your duty to report all income. Likewise, if you perform services for a client and they pay you $600 or more, they generally issue a Form 1099-NEC; once again, your obligation is to report everything, not just amounts on forms. Practically, the cleanest workflow is: separate bank account; simple ledger for income/expenses; save digital receipts; track mileage or actual vehicle costs; and reconcile monthly so Schedule C prep is a copy-and-paste job. The IRS “Self-Employed Individuals Tax Center” links Schedule C and SE instructions in one place — bookmark it and use it as your authoritative reference.

Authoritative references: IRS “About Schedule C,” SE tax page, Gig Economy Tax Center, 1040-ES PDF, 1099-NEC instructions and payor rules, 1099-K page, and Form 7206 overview/instructions.

Self-Employment Tax and Estimated Payments: The Math, the Dates, and a Simple Way to Plan

Self-employment tax is the payroll tax freelancers pay on net profit: 12.4% Social Security (to the annual wage base) and 2.9% Medicare, totaling 15.3%. Unlike a W-2 job, there’s no automatic withholding, so many first-year freelancers are surprised by the bill. The Social Security portion is capped at the wage base set by SSA each year, while the 2.9% Medicare portion isn’t capped. On your Form 1040 you also get to deduct “one-half of SE tax,” which slightly lowers your adjusted gross income. Because there’s no employer withholding, you generally need to make quarterly estimated tax payments during the year; the IRS provides Form 1040-ES with vouchers and also outlines due-date rules and safe-harbor concepts on its Estimated Tax FAQ page. Calendar-year filers typically aim for four payments tied to IRS deadlines, and certain rules (for farmers/fishermen) allow alternative timing; the 1040-ES instructions also explain that filing by early March with full payment can satisfy estimates in some cases. A practical workflow is to set aside a percentage of every payment you receive into a separate “tax bucket” and send estimates electronically through your IRS account on the due dates. If your income fluctuates, you can use the annualized method in 1040-ES to better match payments to your actual earnings pattern. Do not confuse reporting thresholds with taxability: even if you never see a 1099, gig income is still taxable and part of your SE-tax base. The IRS pages linked below provide the official rates, caps, dates, and payment options — use them as your single source of truth.

Deductions That Matter: Mileage, Home Office, Health Insurance, and Retirement

Deductions reduce your net profit, which reduces both income tax and SE tax. Vehicle expenses are a common write-off: for 2025, the standard mileage rate is 70¢/mile for business use, or you can deduct actual costs if you keep detailed records; the IRS publishes the rate annually (see Notice 2025-5 and the mileage-rates page). The home office deduction applies when you use part of your home regularly and exclusively for business; IRS Publication 587 explains the rules and how to compute the deduction (simplified vs. actual-expense method). Self-employed folks can also deduct health insurance premiums for themselves, a spouse, and dependents using Form 7206; this “above-the-line” deduction lives on Schedule 1 and lowers AGI when you qualify. For retirement, SEP-IRAs and one-participant (“solo”) 401(k)s can materially reduce taxable income when you have the cash to contribute; the IRS updates elective-deferral and contribution limits each year and outlines plan choices in Publication 560 and related pages. None of these deductions change the rule that expenses must be ordinary and necessary for your trade; keep receipts and a simple log (miles, dates, purpose) to substantiate your claims. If you mix business and personal use (e.g., a vehicle or a cell phone), document the allocation method you used. As always, the authoritative links below are your best references for eligibility, formulas, and current-year limits.

Sources: IRS standard mileage rates & Notice 2025-5; Publication 587; Form 7206 & instructions; Publication 560 and plan pages; IRS business-expense resources.

Putting It All Together: A Simple Filing & Payment Checklist (Beginner to Advanced)

Start with clean books: reconcile your business bank account monthly, categorize income and expenses, and export a year-end profit-and-loss (P&L). Confirm which big deductions apply to you — vehicle (mileage vs. actual), home office (Publication 587), health insurance (Form 7206), and retirement plan contributions (Publication 560). Next, prepare Schedule C from your P&L, confirm your depreciation/section 179 if you bought equipment, and make sure your expense categories reflect ordinary and necessary costs for your trade. Then complete Schedule SE to calculate SE tax at 15.3% (with the Social Security portion capped at the SSA wage base) and claim the deduction for one-half of SE tax on Form 1040. Cross-check estimated payments you made during the year (via 1040-ES or your IRS account) and apply them on your return. If you’re a heavy vehicle user, verify that your mileage log (or actual expenses) is contemporaneous and complete; if you claim a home office, keep your method choice and support handy. Before you file, review information returns you received: 1099-NEC from clients, 1099-K from platforms, and health-insurance statements for 7206; remember that missing forms do not excuse unreported income. After filing, set up next year’s cadence: quarterly estimate reminders on your calendar, a monthly “close” to keep books clean, and a plan for retirement contributions if cash flow allows. Finally, keep the official IRS pages bookmarked; rules, thresholds, and contribution limits are updated periodically, and the IRS sites are the definitive source for dates and numbers.